Good year for Tesco as profits top £1.6bn

It has been a good year for the supermarket retailer Tesco which has seen pre-tax profits soar to £1.6 billion, according to the group's full-year preliminary statement issued today.

In addition to driving up pre-tax margins by 17.6%, the company said that it had slashed its debts by £600 million, down to £4.1 billion.

In the UK, sales grew by 14.2% to £26.4 billion, up from £23.1 billion in 2003, of which 6.7% came from existing stores and 7.5% from net new stores. During the year Tesco opened 21 Extra stores, of which eight were new and 13 were extensions – making 83 of this type. In total, Tesco operates in 277 stores throughout the UK.

Adding more gloss to the year-end statement was the announcement that the company will increase its global headcount by around 20,000.

Tesco's 326,000 current employees worldwide will benefit from a £148 million profit share pay out, the company said.

Chief Executive Terry Leahy said that the figures demonstrated that Tesco was a "great British success at home and abroad".

He added: "All four parts of the strategy have contributed to our outstanding results this year. We have an excellent plan for next year and believe we can continue to deliver the best shopping experience for customers."

However, the group made one accounting adjustment, in accordance with last year's new FRS 5 accounting standards guidelines, which saw a £395 million reduction in sales this year and £333 million last year. The adjustment did not "materially" impact sales growth, and profit and cash flow were "not impacted at all".

Group sales including VAT increased by 18.7% to £33.6 billion (2003 - £28.3 billion) up 16.7% to £33 billion on a 52-week basis.

Total international sales grew by 29% to £6.7 billion and contributed £306 million to underlying operating profits, up 44% on last year. The operating profit margin grew from 4.5% to 5.1%.

Group capital expenditure for the year was £2.3 billion (up £200 million on 2003), and this is expected to rise to around £2.4 billion next year.

The Board has proposed a final dividend of 4.77p (2003 – 4.33p). This, together with the interim dividend of 2.07p (2003 – 1.87p), gives a total dividend of 6.84p (2003 – 6.20p). This represents an increase of 10.3%. The final dividend will be paid on 25 June 2004 to shareholders on the Register of Members at the close of business on 30 April 2004.

Tesco reported that its FRS 17 post tax pension deficit was £472 million at the year-end reducing from £540 million last year.

(gmcg)